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5 Earnings Short-Squeeze Plays to Trade

I would avoid CBOU or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops below some key near-term support levels at $11.35 a share with high volume. If we get that action, then CBOU will set up to re-test or possibly take out its next major support levels at $10.05 to $9.93 a share.

KiOR

Another earnings short-squeeze trade candidate is KiOR (KIOR), which is set to release numbers on Thursday before the market open. This company has developed a proprietary technology platform to convert low-cost, abundant and sustainable non-food biomass into hydrocarbon-based oil. There are currently no Wall Street estimates available for KiOR.

This stock has been dowtrending badly so far in 2012, with shares off by 30%. Shares of KiOR are trading about two points above its 52-week low of $4.82 a share as we approach its earnings report.

The current short interest as a percentage of the float for KiOR is rather high at 13%. That means that out of the 20.05 million shares in the tradable float, 4.14 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 15.1%, or by about 544,000 shares. If the bears are caught leaning too hard into this quarter, then we could easily see the stock rip higher as shorts rush to cover some of their bearish bets post-earnings.

From a technical perspective, KIOR is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock recently dropped sharply from its October high of $9.52 to its recent low of $4.82 a share. Following that drop, shares of KIOR have rebounded sharply towards its current price of $7.06 a share. That rebound has now pushed KIOR within range of triggering a near-term breakout trade post-earnings.

If you're bullish on KIOR, then I would wait until after its report and look for long-biased trades if this stock can manage to break out above some near-term overhead resistance levels at $7.18 to $7.24 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 179,725 shares. If we get that breakout, then KIOR will set up to re-test or possibly take out its next major overhead resistance levels at $8.94 to $9.52 a share.

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